June 8, 2022
Practical advice for founders from the mindset of an operator
Over the last few days, startup founders have been offered a raft of austerity advice.
I have a somewhat controversial personal point of view. That is coloured by my stints as an operator/manager.
First things first, “be financially responsible” is evergreen advice. As a founder, you should always be disciplined in spending. It is even more applicable in rough times. Be frugal. I am not disputing this.
That said, now the more nuanced points.
1. Not all burn is created equal
If you have not yet found product-market fit and positive unit economics, then spending on sales and marketing is not wise. It is silly otherwise but can be lethal now in the days to come.
However, I would invest in core – such as, tech, product, credit/analytics for a lender. This is time to build. Competitors will regress. Consumers will be less distracted. You can go deep to understand your pull, build products to really solve the problem statement, and set up positive economics to scale.
Say “No” to frivolous spending. But “Yes” to genuine investments.
2. Worthwhileness vs survival
This is for early stage companies. If you are already at the growth stage, survival is the priority – there is no other question. Building a startup is inherently personal. Perhaps comparable to raising a child. By extension, it is hard to view it dispassionately.
However, if you are an early stage startup founder who has less than a 24-month runway, I urge you to take this point of view.
So, in two years, would you rather (a) know if your start-up was worthwhile Or (b) survive the winter to arrive with little capital and no insights? Starting up is not a job to cling to. It is an option to create something fantastical.
Go on that journey. Build your product, test it with customers, refine features, improve pricing, smoothen UX, build backend to scale, etc. By all means, be efficient in doing so. But, do all those things that will convince you that this idea is worthwhile. Because if you can prove that it is worthwhile, you will still be able to raise funding.
But, please don’t indiscriminately freeze expenses, shut experimentation, whittle down to a skeletal team and trickle through the winter. You may survive, but I am not sure what you emerge with will be worthwhile.
3. Silver lining
Dark times do bring some good tidings:
- Plentiful talent – through redundancy but much more due to low morale.
- Easier customer attention – not an invitation to blow up marketing/sales, but to test and learn.
- M&A / acqui-hiring – to bolster product proposition.
- And for the well-funded, land grab opportunities like none other.
That’s my point of view borne out of earlier downturn experiences. I don’t profess these are absolutes – just that things are not black-and-white. And that you should focus on worthwhile goals. And that there is hope yet.